Rafale fighter scandal builds around Modi, Hollande and a film actress

Anil Ambani got Rafale work and funded French president’s partner

French media give Rafale story fresh boost as heir to Bofors

It would have seemed improbable if not impossible when he became India’s prime minister in 2014 that Narendra Modi would personally face allegations of crony capitalism and possible corruption involving a French actress, a former French president, one of India’s most unsuccessful debt-ridden prominent businessmen and a contract for fighter jets.

Yet that is what has built up in recent months and was escalated yesterday by a statement made by former French president Francois Hollande to Mediapart, a French news website that is investigating a contract for 36 Dassault Rafale jets arranged unexpectedly by Modi when he visited Paris in April 2015.

A Congress Party protestor in Delhi with a model of a Rafale jet with Narendra Modi and BJP president Amit Shah

Hollande was still in power in 2015 and the contract later generated work for Anil Ambani, one of two Mumbai-based brothers who run separate businesses with the name Reliance.

Ambani is close to Modi and his heavily indebted Reliance Group part-funded a film in 2016 planned by Julie Gayet, a French film actress and producer who is Hollande’s partner.

Clearly anxious to dismiss a report that there was a link between the Rafale deal and the film financing, Hollande told Mediapart that the Indian government “proposed” Reliance. “We did not have a choice, we took the interlocutor who was given to us”.

The India government, equally anxious to dismiss crony links between Modi and Ambani, has repeatedly insisted that Ambani was chosen by Dassault as its joint venture partner for supplying components under an offsets deal.

This seems unlikely because Ambani and Reliance have no experience in the defence sector, let alone aircraft component engineering. It is widely assumed in Delhi that Dassault came under considerable political pressure – presumably being assured that it would have effective management and financial control, even though Reliance has a 51% stake against its 49%.

Julie Gayet and Francois Hollande

Hollande’s statement was a blow for Modi, but equally significant is Mediapart’s investigation because it increases the likelihood that the scandal will haunt Modi and the BJP government up to the general election that is due by next April.

The Congress Party, led by Rahul Gandhi, wants to build the contract into India’s biggest defence scandal since the mid-1980s. That was when allegations built up against his father, prime minister Rajiv Gandhi, of Rs64 crore (then about $50m) bribes on a $1.4bn howitzer gun contract with Bofors of Sweden, leading to a scandal that continues to haunt the dynasty.

Bofors developed into a major issue because it was pursued not just by the Indian media but also became a big media and political issue in Sweden. Similarly, an Augusta Westland VVIP helicopter contract scandal during the last Congress government has run for years because it was also being pursued in Italian courts. When I last wrote about Rafale in July, I said that there was no sign of such action in France building new roots for the current allegations.

That has now changed with Mediapart taking up the story. Interested because of the French political implications of Hollande’s involvement, it says the funds from Reliance were handled by Visvires Capital, an investment fund with offices in Paris and Singapore founded by Ravi Viswanathan, a French-Indian former banker who had previously provided services forAmbani.

The report says: “One day, the Indians came and the film could be made,” recalled one of the production team of the film Tout là-haut, co-produced in 2016 by the actress Julie Gayet, the partner of then French president François Hollande. Tout là-haut (‘To the top’)….The film’s budget was 10 million euros and the Indian funding – initially to be 3 million euros but later reduced to 1.6 million – was a lifeline”. (The Mediapart report is in full here)

The Indian government yesterday “reiterated that neither GoI nor French Govt had any say in the commercial decision.” Today it has implicitly accused Hollande of a “conflict of interest”, suggesting that his statement “perhaps needs to be seen in its full context – where the French media has raised issues of conflict of interest involving persons close to the former President”.

In fact, the positions being taken by all sides are perfectly tenable and in line with each other. It is alleged that Modi personally said in Paris that Ambani should have the joint venture contract, so the Indian government can claim not to have been involved.

Equally, Hollande can say he had no role because Modi could have told Dassault, or made sure it got the message. That left Dassault and Ambani to do their joint venture deal later, separate from the government-to-government main contract. It could also be argued that Ambani, who accompanied Modi on his Paris visit and who had a company involved in film financing, met Julie Gayet while he was there and became interested in helping with her film.

But that is not how political scandals and battles develop because Modi and Hollande (below, in 2015) were performing as prime minister and president and were close, respectively, to Ambani and Gayet. It is also alleged Modi breached established defence procurement procedures by striking the sudden deal which senior officials did not expect.

S. Jaishankar, the foreign secretary who accompanied the prime minister on the trip, did not seem to know what was planned. When asked about Rafale negotiations at a media conference that I attended on April 8 before he left Delhi, Jaishankar said that, as was customary for heads of government meetings, Modi and the French president would only focus on ‘big picture issues, even in the security field’.

In its attempt to fight off the Congress assault, the government is now alleging corruption involving the last Congress-led government, which struck an earlier deal for 126 Rafale jets in 2012. Reliance Industries run by Anil Ambani’s brother Mukesh would have been involved in that deal, which was never finalised and was cancelled by Modi when he went to Paris.

No price was announced for the 36 aircraft during the Paris visit, but after long negotiations a government-to-government contract was eventually signed in September 2016 forRs58,000 crore (then Euros 7.85bn), which equalled an average of Rs1,611 crore (then Euros 216m) for each aircraft. Congress and other critics say that is far more than the per-aircraft price for the 126 aborted order, which means that Modi has gone back on a statement he made in Paris that the 36 aircraft price would be less.

That led to pressure on the government to announce the final contract price, but it has repeatedly refused to do so, saying it had to remain secret for security reasons. Its obfuscations have increased suspicions that it has something to hide.

If it had revealed the figure months ago, the political momentum might not have built up around the alleged cronyism of Modi, Ambani, the former president and his film star partner – and Modi might not have become saddled with a potential heir to the Bofors affair.

There’s a major errror in this piece. The deal cancelled by Modi in Paris was not between Dassault and Muskesh Ambani, but between Dassault and the Indian public sector company Hindustan Aeronautics Ltd., which was to have manufactured 108 jets in India.

Not a major error Rohini because Mukesh Ambani was to have been involved – I have amended the wording to make that clear je

By: Rohini on September 24, 2018 at 11:29 am

Voila John
Shocking if true, denting Modi credibility. Who to trust? Is there a choice? Not in my lifetime? Cronyism is a compulsion to win elections, period. Whither the tall claims of clean government and governance. Let the story unfold to discover truth. Regards BK

By: BK Syngal on September 23, 2018 at 9:43 am

How dismaying; so much of the strength of Modi was that he said he would have no part in corruption or cronyism or whatever……heaven knows it is a problem that can raise its head in any country, but India most particularly needs to demonstrate that she as a nation is ‘growing out of this evil’…whereas others like South Africa and further north in Africa are still enmeshed in this crime.